The Personal Investment Management & Financial Advice Association (PIMFA) has submitted a formal response to the Financial Conduct Authority (FCA) regarding its review of two recent initiatives.
The Association, a trade body representing financial advisers and wealth managers, is seeking to have its say as the regulator reviews the effectiveness of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).
The response begins by stating that, although RDR has improved standards and increased levels of professionalism within the industry, consumers have suffered as the number of financial advisers falls and the costs of accessing advice increase.
PIMFA calls on the FCA to monitor how any new regulatory initiatives impact on the cost of compliance for firms. It states that “a balance needs to be found between protecting consumers and ultimately excluding them from advice altogether”, claiming that some of its member firms now spend 58% more on compliance than was the case prior to RDR.
Much of the response refers to the increasing need for financial advice amongst the older generation, and in order to make it easier for people to access regulated advice on their retirement options the Association calls on the FCA to do more to promote the pensions advice allowance proposals from the FAMR. The FAMR was designed to improve access to financial services, and one of its recommendations was that consumers would be allowed to withdraw £500 from their retirement savings in order to pay a financial adviser’s fees.
PIMFA’s response states that “it should be a concern to the FCA that such a small proportion of individuals are currently accessing financial advice to help them navigate pension freedoms”.
Simon Harrington, Senior Policy Adviser at PIMFA, said:
“There is a clear and obvious benefit in the use of financial advice. People who access it receive better outcomes than those who do not. It is, therefore, a source of some concern that such a small proportion of the UK population – including a number of whom who could reasonably benefit from financial advice – do not access it. The role of financial advice will become increasingly critical over the coming years. In comparison with older generations, people are now accumulating less liquid wealth, property, and are not saving an adequate amount for their retirements. As we live longer and spend more time out of work, the role of financial planning and the management of what wealth we do have will become increasingly important.
“The single biggest contributor to the advice gap currently is the cost of advice. Whilst the FCA recognises and defines the cost of regulation as the ‘cost of doing businesses well’ it also needs to recognise the unintended consequences of the regulatory obligations that it places upon firms. No single process exists which any firm can undertake in order to streamline their regulatory obligations and as a result, regulatory costs, as well as the cost of compliance, continues to rise. If the regulator is serious about closing the advice gap, making advice more affordable and encouraging more people into this market, it needs to also consider what role it can play in overseeing a regulatory landscape which encourages this.”
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